FERC Rejects MISO’s Proposed Restrictions on Joining the Development Queue

Securing interconnection and transmission rights and completing related upgrades is often the longest lead-time item in an electric generator’s development timeline. At the same time, many potential new power plants are being developed and vying for access to the electric transmission grid. The policy of most grid operators is to address interconnection requests on a “first come first served” basis. As a result, developers/interconnection customers are incentivized to submit their interconnection requests as early in the development process as possible in order to save their projects’ place in line. Over the last two years, Midcontinent Independent System Operator, Inc. (“MISO”) experienced record-high interconnection requests, and yet nearly 80% of these submissions ultimately were withdrawn prior to commercial operation of the project. MISO attributed this trend to developers submitting multiple requests for the same proposed project to test (and quickly withdraw) multiple interconnection concepts, many of which the developers knew they were not going to support through the entire queue process.

In an effort to reduce the number of requests in its interconnection queue that will ultimately be withdrawn, MISO requested that the Federal Energy Regulatory Commission (“FERC”) approve revisions to MISO’s interconnection request procedures related to milestone payments and site control requirements, which revisions would place substantially higher hurdles to a potential new power plant joining MISO’s generator interconnection queue. In Midcontinent Independent System Operator, Inc., 166 F.E.R.C. ¶ 61,187 (2019), FERC rejected MISO’s request, but FERC’s ruling leaves open the possibility that it might approve a similar set of heightened requirements, so long as MISO makes modifications to its proposal to account for interconnection customers that might be disproportionately disadvantaged. Continue Reading

District Court Provides Guidance On Climate Change Analysis Under NEPA

A federal district court has ruled that the Bureau of Land Management (“BLM”) failed to adequately consider climate change when approving a set of oil and gas leases on public lands in Wyoming. The ruling should be of broader interest to developers and energy companies because it offers guidance on how to properly analyze a project’s effects on climate change under the National Environmental Policy Act (“NEPA”). The law in this area remains unsettled –especially since President Trump rescinded the Obama Administration’s formal guidance on NEPA and climate change in 2017. Future developments are likely, and project sponsors should monitor them closely.

At issue in the case are oil and gas leases covering 300,000 acres of public lands in Wyoming. For each lease sale, BLM prepared an environmental assessment to comply with NEPA. The environmental assessments discussed climate change on a “conceptual level,” without quantifying and analyzing the greenhouse gas emissions that would result from the lease sales. The court found the analysis inadequate under NEPA, and it halted drilling under the leases and sent the matter back to BLM for additional environmental review. In its lengthy ruling, the court offered concrete guidance to BLM on how to fix its analysis of greenhouse gas (“GHG”) emissions and climate change on remand, including that:

  • BLM should quantify GHG emissions that would result from drilling oil and gas wells on the leased parcels.
  • BLM should provide more detail about “downstream” GHG emissions that would result from the consumption of oil and gas produced under the leases.
  • BLM should better evaluate the “cumulative” effect of the leases together with other projects, including by comparing GHG emissions from the leases against available emissions forecasts and other BLM programs.

This guidance may also serve as a useful roadmap to NEPA compliance for other projects, particularly other energy projects. And development opponents are likely to use the court’s reasoning to challenge future NEPA documents. Below we break down the court’s direction on three categories of GHG emissions, each requiring a different level of detail. Continue Reading

CDP Applicant May Not Challenge Local Agency’s CEQA Decision on Coastal Development Permit While CDP Appeal to Coastal Commission Is Pending

In Fudge v. City of Laguna (G055711), published on February 13, 2019, the Fourth District Court of Appeal joined the First and Sixth Districts by reaffirming the need for a litigant to wait for the California Coastal Commission’s (“Commission”) determination on the appeal of a coastal development permit (“CDP”) prior to initiating litigation.

The key takeaway here is that a local agency’s California Environmental Quality Act (“CEQA”) determination in cases where a CDP has been appealed is not final for purposes of adjudication if the Commission has not ruled on the appeal. While the exhaustion of administrative remedies doctrine is well established, this decision is unique in that it applies the doctrine even where a judicial challenge alleges only CEQA violations, providing insight into the relationship between CEQA and the Coastal Act. Moreover, this decision also addresses the extent to which the Commission’s standard of review is de novo. Continue Reading

California Supreme Court Clarifies Scope of De Novo and Substantial Evidence Standards Of Review In CEQA Cases

In Sierra Club v. County of Fresno (S219783), the California Supreme Court unanimously reaffirmed that the substantial evidence standard of review does not always apply when a lead agency prepares an environmental impact report (“EIR”) for a development project. Rather, the court determined that the less deferential de novo standard applies if the EIR’s discussion of a potentially significant impact has been omitted or is factually insufficient. In other words, while a lead agency has considerable discretion as to the methodology and analysis it employs to analyze a potentially significant impact, an EIR must reasonably describe the nature and magnitude of the impact (i.e., include a meaningful explanation of why an impact is significant or not) if it is to survive judicial scrutiny. In County of Fresno, the court employed the de novo standard and held that the EIR’s air quality analysis was inadequate because it did not explain the connection between the project pollutants and negative health effects or explain why it could not make such a connection. Continue Reading

On Repeat: Courts Again Uphold Low Carbon Fuel Standard Programs

The Ninth Circuit Court of Appeals recently upheld – for the second time – California’s Low Carbon Fuel Standard (“LCFS”) against constitutional challenges brought by industry groups. The case, Rocky Mountain Farmers Union v. Corey (9th Cir. 2019) (No. 17-16881) (“Rocky Mountain II”), considered the groups’ claims that all 3 historical versions of the LCFS violate the Commerce Clause and the “federal structure of the Constitution” by regulating extraterritorially. The court held that while the plaintiff’s claims had changed form since the first time the court upheld the LCFS, “both the regulations and the claims have the same core structure now as they did then.” The court used this similarity to guide its analysis and uphold the district court’s dismissal. Continue Reading

Cannabis Regulation is the New Frontier in Real Estate and Land Use Control

California has positioned itself as a leader on emerging cannabis policy. While federal law still prohibits cannabis-related activities within the State’s borders, several largely progressive laws in California permit the possession, cultivation, transportation, and distribution of cannabis. The effects of the burgeoning cannabis industry are far-reaching, and have already proven to significantly impact the real estate industry. This Article addresses the history of cannabis regulation within California, the legality of various land use approaches employed by jurisdictions throughout the state and some of the nuances a property owner should consider when negotiating a commercial lease with a tenant who intends to use the premises for a cannabis-related use. Continue Reading

Five Years in the Making: California is One Step Closer to a Comprehensive Update to the CEQA Guidelines

The Governor’s Office of Planning and Research (“OPR”) has spent five years drafting a comprehensive update to 30 sections of the California Environmental Quality Act (“CEQA”) Guidelines.[1] The updated text[2] (“Final Text”) ensures the Guidelines are consistent with recent court decisions, implements legislative changes, clarifies rules governing the CEQA process, and eliminates duplicative analysis. Several changes to the Guidelines address two hot button topics: global climate change and statewide affordable housing shortages. During the deliberative process, the Agency also released its “Final Statement of Reasons for the Regulatory Action Amendment to the State Guidelines” to give more history and context to each change to the Final Text.[3]

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Critical Habitat Must Be Habitat for Listed Species, Supreme Court Says

An area designated as critical habitat under the Endangered Species Act must first qualify as “habitat” for listed species, the Supreme Court held this week in the closely watched Weyerhaeuser case. The Court’s November 27, 2018 ruling, which reversed a decision by the Fifth Circuit, has the potential to narrow federal agencies’ discretion to designate as critical habitat areas that are currently unoccupied by endangered or threatened species, but the opinion leaves important questions to be answered by the lower courts – including the meaning of “habitat.” The Court also held that agency decisions not to exclude specific areas from a critical habitat designation on economic grounds are subject to judicial review, reversing the Fifth Circuit and overturning the current law in the Ninth Circuit. Continue Reading

Battle for Rent Control May Not be Over

In the months leading to the election, cities and counties began to adopt resolutions and other measures to advance potential rent control measures. In Los Angeles, the City Council approved a Resolution in support of Proposition 10 by a vote of 13-1 last month. The Resolution highlighted the increasingly high rental rates in the area and across California that have created a severe housing affordability crisis. The San Francisco Board of Supervisors approved a similar Resolution in support of Proposition 10 acknowledging the opportunity for policymakers to confront the housing affordability crisis by expanding rent control. On Tuesday, voters defeated Proposition 10 by a vote of 65% to 35%. Notwithstanding this defeat, we anticipate that local governments will continue to explore ways to address housing affordability, including rent control, as a policy priority concern. Continue Reading

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